FY 2013-14 House Budget Plan: Spending Similar to Senate, Differs on Tax Reform and School Choice

The North Carolina House unveiled its two year spending plan on Sunday night. Total spending for FY 2013-14 would come to $20.6 billion – virtually identical to the Senate’s budget proposal and Gov. McCrory’s budget released in March.

The House plan includes a more modest tax reform package than the Senate, a significant school choice initiative and more funding for slots in North Carolina’s Pre-K program.

The House budget projects their “Tax Simplification and Reduction Act” will result in tax savings of $38.5 million in FY 2013-14 and $381 million in 2014-15. The House also anticipates an additional $52 million and $57 million, respectively, from repealing the state death tax. By comparison, the Senate designated $217 million and $553 million in the next two years, respectively, for their tax reform “finance package.”

The House also diverts $115 million in Tobacco settlement funds for general operations and sets aside $200 million each into the Repair & Renovations and savings reserve accounts.

The House plan also:

Education

• Creates the Opportunity Scholarship Program, which would provide financial assistance of $4,200 a year per student opting for nonpublic schools. The budget projects $12 million in savings ($36 million in the second year) for the Opportunity Scholarship program, based on anticipated enrollment reductions in traditional public schools. The Senate plan included no such program.
• Conversely, the House budget appropriates $10 million in the first year, and $40 million in the second year, to fund Opportunity Scholarships.
• Reduces funding for teachers assistants by $25 million (a 4% reduction), and allocates TA funding in K-3 based on student headcount.
• Phases out supplemental salary for teachers with advanced degrees, saving $19 million in 2015-15.
• Keeps current LEA “flexibility” adjustment reduction at $376 million. Conversely, the Senate budget eliminated this adjustment and replaced it with specific reductions outlined in the budget.
• Implements a “Guaranteed Admission Program” via the UNC and community college system whereby the lowest qualified students admitted to UNC schools would be diverted to community colleges who in turn would be guaranteed admission as a junior to a UNC campus upon completion of an associate’s degree. Funding for this program involves a $4.4 million transfer of funds from the UNC system to the Community College system.
• Increases Community College tuition by $2.50 per credit hour for both in-state and out-of-state students. Enables a budget reduction of $10.4 million.
• Increases nonresident tuition rates in 2014-15 by 12.3% for six universities (NC State, UNC-Chapel Hill, UNC-SA, NCA&T, UNC-Charlotte, and UNC-Wilmington) and by 6% for all other campuses.
• Includes a $125 million management flexibility reduction for the UNC system.

 

Medicaid/HHS

• Like the Senate plan, sets aside an extra $308 million to fill the current year’s hole in the Medicaid budget.
• Includes a$434 million increase to reflect rising Medicaid costs, compared to a $340 million increase included in the Senate plan.
• $49.7 million additional funds for Medicaid to accommodate additional enrollees resulting from Obamacare. While NC has declined to expand Medicaid under Obamacare, the state still anticipates a rise in enrollment due to provisions in the new law. This provision is also included in the Senate budget.
• Uses $24.8 million in additional lottery funds to add 5,000 slots for the NC Pre-K program, bringing total available slots to 30,000. The Senate budget instead diverted funding from the Pre-K program to the child care subsidy program.

 

Natural and Economic Resources/Commerce

• Includes a $1.25 million increase to expand state marketing efforts and subsidize the NC Wine and Grape Growers Council, the Senate budget allocated $1.5 million for similar purposes.
• $4 million increase in funding to the Clean Water Management Trust Fund, the Senate budget eliminated the Fund and created a new Water Infrastructure Authority.
• Spends an additional $800,000 (growing to $1.5 million in 2014-15) to “develop a comprehensive branding strategy to promote North Carolina.”
• Maintains $16.6 million in funding for Rural Economic Development Center in 2013-14, and increases that support to $20 million in 2014-15. The Senate eliminated state support for the Center and instead established a new division to address rural needs.
• Eliminates operational support for the Biofuels Center, Community Development Initiative, Council of Governments, Institute for Minority Economic Development, Land Loss Prevention Project, NC Association of Community Development Corporations, NC Indian Economic Development Initiative, and Partnership for the Sounds.  Total savings of roughly $10 million.
• Shifts half of the Biotechnology Center’s subsidy ($8.6 million) from recurring to nonrecurring funding. The Senate simply cut the Biotech Center’s subsidy by half.

 

Justice and Public Safety

• House plan differs from Senate plan by not moving the State Bureau of Investigation to the Division of Law Enforcement. Instead, the House leaves SBI in the state Department of Justice, but shifts the crime lab into a different department.
• Closes five prisons and three juvenile facilities to reflect declining prison populations for total savings of roughly $40 million by 2014-15.

General Government/Elections

• Allocates $1.5 million to implement a voter identification program, funds to be used largely for new staff for the State Board of Elections.
• Takes $3.5 million from the NC Public Campaign Finance Fund to fund operations for the State Board of Elections. Repeals the Fund used to subsidize Superior Court judges.
• Appropriates an additional $1.5 million to the NC Symphony.
• Provides $1.5 million to the City of Kings Mountain to build a new public library.

State Employees

• Includes no pay raise but does add five vacation days.
• Allocates $10 million to a salary adjustment fund, to compensate for select employees receiving promotions or getting raises based on labor market rate adjustments.
• Sets aside $160 million in 2014-15 to a compensation adjustment reserve.
• An additional $36 million is appropriated to the state employee retirement system to keep up with growing obligations, same as the Senate plan.
• Creates a reserve for increased contributions to existing employee benefits programs with $56.4 million in 2014-15.
• Increases contributions to the State Health Plan by $33 million in 2013-14 and $101 million in 2014-15 to meet the growing needs of the program providing health insurance to state employees and retirees.